New tax break could make solar energy more affordable at home

The Solar Trade Association (STA) marked a significant victory for solar PV and solar storage systems last week by securing a 5% rate of VAT on battery storage for householders who are installing a solar storage system alongside a new solar PV system.

This is set to significantly improve the economic validity of installing solar storage technology, the STA claims. Conversations between HMRC and the STA revealed that solar storage systems were previously considered to be at the standard 20% VAT rate. The change now brings battery storage to the same levels of household fuels, grid energy supply and various other onsite technologies.

The STA has provided evidence to HMRC to justify the inclusion of battery storage at the reduced VAT rate of 5%, and the STA claimed that installers previously faced risks to fair competition at the higher rate. The changes could help make the installation of solar PV and battery technology much more financially appealing to homeowners.

To learn more about battery storage and the 8 key matters you should consider when choosing a battery, see our blog by expert installer Ollie Gibbs of Sungift Energy.

The debate, however, still rages on. Current clarifications from HMRC only apply to new installations alongside a solar PV installation, while the STA wishes to campaign for all storage to be available at the reduced rate. Discussions between the two bodies are ongoing, but at present batteries sold as retrofit products still remain at the 20% rate.

Seb Berry, STA’s Vice Chair and Head of External Affairs at Solarcentury said:“This is a helpful and welcome decision by the Treasury following a major lobbying effort from the Solar Trade Association. Reduced VAT on new systems will encourage homeowners to embrace storage technologies alongside solar. Solar remains a good investment and storage means householders can now take even greater control of their energy bills. All STA members will be delighted by this win.The policy wins are needed as solar deployment has fallen to a seven year low. The industry is struggling with a policy framework that now provides tax breaks for fossil fuels that are not applied to solar.”

Leonie Greene, Head of External at Solar Trade Association said:“The policy win also comes as BEIS releases its latest public opinion tracker on energy showing solar retains its top spot as the nation’s energy sweetheart at a massive 86% of the public supporting the technology. Only 1% of the British public is strongly opposed to renewables.”

The news arrives in the wake of government plans to transform Britain into a hub of innovative energy technology, which include investment into solar PV and battery technology.